SacStarts

Locally founded Engine Yard, a provider of Ruby on Rails hosting has closed a series B round of $15 million from New Enterprise Associates, Amazon.com, and existing investor Benchmark Capital. NEA led the round, and partner Peter Sonsini is joining Engine Yard’s board.

The money raised in this Series B will help Engine Yard develop a platform for cloud computing clusters and to continue funding the development of Rubinius and Merb, their open source projects.

In January 2008 the company raised a $3.5 million Series A round from Benchmark Capital. The quick turnaround to a Series B comes because the company wanted to raise money before they needed it, says Engine Yard’s CTO, Tom Mornini. The company’s board was concerned about the tightening market for venture capital, and decided to raise enough cash to carry them for some time.

The company is growing quickly. When we profiled Engine Yard in January of last year, CEO Lance Walley said they had 34 customers. Mornini tells me they currently host more than 400 companies and experienced 40% growth in the first quarter of this year.

With the new funding, Engine Yard plans to start deploying their managed hosting clusters on existing cloud hosting providers. Mornini wasn’t able to say which providers, but with Amazon as an investor, it’s safe to say that EC2 is a likely target.

The addition of Amazon as an investor is an interesting move. Thanks to Amazon’s cloud infrastructure services EC2 and S3, the company is widely seen as a leader in the emerging cloud computing market. They’ve been criticized, however, for not providing uptime guarantees, service level agreements, or managed services. This investment now ties them to a company that’s providing fully managed services for cloud deployments.

The size of Amazon’s investment was not disclosed and neither company is talking about any specific plans for working together.

The company currently hosts their clusters in traditional data centers, placing racks and server hardware in data centers around the country. Mornini says they plan to continue to use this infrastructure for clients that require physical hardware. Many clients, he says, are unwilling to move their data into the cloud, often citing security or regulatory concerns.